Saturday, February 24, 2007

Young Lawyers Sue, and Little Changes

Students taking the bar exam. The business of training people for the exam is dominated by BAR/BRI, which has been accused of anticompetitive behavior.By JONATHAN D. GLATER

COMPETITORS say that a leading company ripped down their posters and used deceptive marketing tactics; former customers say that the same company paid business rivals to close their doors. And one competitor says he fears that he was the victim of outright theft.

This is how the business of training aspiring lawyers to pass the bar exam is conducted, according to documents and testimony that have surfaced as a result of a federal lawsuit in Los Angeles. It is a business dominated by a single company that expanded, depending on whom you believe, either by squashing its competitors or by simply offering a superior product.

That company is BAR/BRI. And students who took its courses filed a class-action lawsuit two years ago contending that the company operated an illegal monopoly and overcharged them by about $1,000 each. The students, seeking hundreds of millions of dollars in damages, also said that BAR/BRI cut illegal deals with potential competitors to protect its market. But earlier this month, lawyers in the case reached a tentative settlement agreement for $49 million, which could net each student in the class about $125.

The deal, which still requires court approval, has infuriated some of the original plaintiffs in the case, who harbored such anger against BAR/BRI that they wanted to see the company broken up. BAR/BRI is a unit of the Thomson Corporation, the large information services concern, and Thomson says the accusations in the lawsuit against BAR/BRI involve activities that occurred before it bought the company in 2001. BAR/BRI’s lawyers say the company has done nothing wrong and that the students’ claims are meritless.

It is hard to gauge the strength of the case against BAR/BRI, because many of the filings are sealed — at the request of the defendants, the plaintiffs’ lawyers say. But depositions and other court documents that have become publicly available during the course of the litigation have been laced with accusations that BAR/BRI engaged in unsavory conduct. Other claims that have emerged in the case also suggest just how petty and cutthroat the entire bar review market can be.

In a deposition for the Los Angeles case, one former competitor, Hugh Reed, contended that BAR/BRI representatives tore his company’s posters off of law school walls; both he and James J. Rigos, a current competitor, contended that the company exaggerated its students’ success rate on the bar exam. And Mr. Rigos said in court filings that he believed that his offices might have been repeatedly burglarized because he was a potential witness in the Los Angeles antitrust litigation.

Lawyers for BAR/BRI have denied Mr. Rigos’s accusations.

Bar review programs like BAR/BRI thrive because of the tremendous anxiety provoked by the bar exam. The exam, a prerequisite to practicing law in most states, is the last major hurdle to a legal career and comes after years of legal education that can leave students with bills of more than $100,000. The exam can stretch over two or three days and requires mastery of law throughout the country and in a particular state.

More than 80,500 people took a state’s bar exam in 2005, according to the National Conference of Bar Examiners; just under two-thirds — 64 percent — passed. And BAR/BRI sells at least 40,000 bar review courses annually, according to a judge hearing one of the antitrust lawsuits against the company.

BAR/BRI’s review program consists of about two months of intensive pre-exam classes, given five days a week for three to five hours a day. Some students take the courses in a classroom, while others watch a video recording or listen to a podcast.

The courses are not cheap. For its review course this summer for the New York bar exam, BAR/BRI charges $2,700 a student. The company offers courses for exams in 43 states and the District of Columbia, according to court filings, and it generates about $125 million a year in revenue. Nearly half of that is profit.

The precursor of BAR/BRI, a program called the Bar Review Institute, was founded in 1967 in Illinois by Richard Conviser, who is now the chairman of the company. (Thomson declined to make Mr. Conviser available for an interview.) The Bar Review Institute was acquired in 1974 by Harcourt Brace Jovanovich, which combined it with Bay Area Review, a California bar review program, to create BAR/BRI. At first the company faced competitors in several states, but over time it has cemented its position as the dominant provider.

BAR/BRI has been caught up in antitrust litigation at least five times over the years. A suit was filed in federal court in Manhattan in 2005 by a student contending that BAR/BRI illegally tied together two course offerings — one for the state law portion of the bar exam, the other for the uniform nationwide or “multistate” portion — so that rivals offering courses covering just one area could not compete effectively. In its court filings, BAR/BRI has defended its program, which it characterized as a “full-service, integrated course.”

It is the Los Angeles case, which has progressed further, that has angered some of the young lawyers who sued BAR/BRI. They complain that the proposed settlement lets the company off the hook too lightly.

“This suit said, we’re going to fight for monetary damages, but we’re also going to fight to keep this from happening to the people who are coming up after you, for those people who are next year’s class,” said Lisa Gintz, a lawyer in Baton Rouge, La., who is one of the lead plaintiffs opposed to the settlement. “With this settlement agreement, really, BAR/BRI hasn’t made one change. Not one.”

John Shaughnessy, a spokesman for Thomson, declined to comment in detail for this article but provided a brief statement about the settlement: “We are pleased to bring a close to this matter as the alleged actions that formed the basis of the suit occurred years prior to Thomson acquiring the business.”

A SETTLEMENT must be approved by Judge Manuel L. Real of United States District Court in Los Angeles, who is hearing the case. A settlement would mean that Thomson and its co-defendant, the test preparation giant Kaplan Inc., would not have to address in open court the most serious accusation against them: that the two companies agreed in 1997 to stay out of each other’s market.

The students’ complaint asserted that Kaplan agreed not to compete in the bar review market and that BAR/BRI agreed not to compete in the LSAT preparation market. Both Kaplan and BAR/BRI have strongly denied this contention.

“As Kaplan has consistently stated in the litigation, our only agreement with BAR/BRI was to market BAR/BRI services to Kaplan students,” Melissa Mack, a Kaplan spokeswoman, said in a statement.

Over the course of the litigation, other contentions have been made specifically about BAR/BRI.

Mr. Reed, who was interviewed by lawyers for the Los Angeles case, said he worked for BAR/BRI for about 16 years and now owns a Chicago firm that offers individualized bar exam preparation.

Shortly after he left BAR/BRI in 1989, he tried to start a company that would compete against it. In a deposition for the case last summer, he said that BAR/BRI representatives pulled down his posters on several campuses between 1991 and 1993.

“We had information and caught people red-handed tearing down our fliers,” Mr. Reed said in the deposition.

Mr. Reed, who has been involved in litigation against BAR/BRI at least three times over the years (he said that each case settled), also accused BAR/BRI of having exaggerated its “pass rate,” that is, the percentage of students who took its class and passed the bar. Mr. Shaughnessy, the Thomson spokesman, declined to comment on that contention.

One of the most unusual accusations was made by Mr. Rigos, who runs a bar review course in Washington state. It is one of BAR/BRI’s few remaining competitors. Mr. Rigos submitted a statement in federal court in Seattle last summer in an effort to avoid having to produce evidence and possibly having to serve as a witness for either side in the Los Angeles case. If he did so, he said, his business would incur significant costs and would reap little benefit.

Here is what he told the court: Late one evening in the fall of 2005, someone broke into his offices on Fifth Avenue in downtown Seattle. The burglar (or burglars) bypassed a laptop and made for Mr. Rigos’s desktop computer, which was taken. Someone on the staff discovered the break-in the next morning and called the police. It was, Mr. Rigos said in a court filing, the office’s first robbery in more than 25 years.

The second robbery came just two weeks later. Two people were caught on camera: a woman and a man in a baseball cap, Mr. Rigos said. Again, they took his computer, which this time was secured to his desk. Again, the police were called. The investigating officer, Linda K. Dolane, wrote that she found it odd that the computer had been removed despite the locks holding it in place, which were undamaged. She observed in a report, “This is suspicious because unless a person knows how to install and uninstall them there would be damage to the equipment that was being removed.”

No one has been charged in the burglaries. Mr. Rigos said that it was after the robberies that he learned that he could be called as a witness by the plaintiffs in the Los Angeles antitrust case. After all, he was a competitor to BAR/BRI who possibly had evidence showing how the company did business, which could conceivably benefit one side or the other.

BAR/BRI’s lawyers asked to see documents that Mr. Rigos might have and to interview him, to learn what his testimony might be. Mr. Rigos immediately suspected that BAR/BRI might somehow be behind the burglaries, and said so in a document he filed in federal court in Seattle.

“Since we haven’t been broken into in 25 years, or that server stolen, you can read your own inferences there, but I know what my own inference was,” Mr. Rigos said in an interview.

BAR/BRI’s lawyers responded rapidly and strongly to Mr. Rigos’s contention. Alan S. Gruber, a lawyer at the New York law firm of Shearman & Sterling, said in a court filing that Mr. Rigos’s contention “has no basis in fact and is outrageous.”

Mr. Gruber went on to say that Mr. Rigos’s suggestion that the burglaries were somehow intended to intimidate him was “preposterous.”

In his court filing, Mr. Rigos leveled other accusations against BAR/BRI.

Like Mr. Reed, he contended that BAR/BRI overstated its pass rates. He said that BAR/BRI used the threat of lawsuits to try to intimidate Mr. Rigos’s company.

But, Mr. Rigos said in his statement, he wanted nothing to do with the current litigation against BAR/BRI. Costly litigation would hurt his business, he said. Besides, he said in the statement: “The students’ lawsuit will probably settle, producing some refund. However, it will not likely change the industry domination and predatory practices” of BAR/BRI, he said.

THE prospect that Mr. Rigos’s prediction could come true, in that the settlement with BAR/BRI could leave its market position unchanged, has led some of those students to take on the same law firm that was representing them. Ms. Gintz and two more named plaintiffs representing former BAR/BRI students in the antitrust case fired off a strongly worded 10-page memorandum to their lawyers earlier this month, accusing them of an “apparent breach” of their fiduciary duties to the class.

The law firm handling the case for the plaintiffs is McGuireWoods, whose largest offices are in Richmond, Va., and in Chicago. William Allcott, a partner speaking on behalf of the firm, said the decision to settle was made with the best interests of the class in mind, and added that if the case were to go to trial, the firm would aggressively pursue that direction, too.

“We believe that when the court hears the evidence, it is going to conclude that this is a fair, reasonable and adequate settlement for the members of the affected class,” Mr. Allcott said. “If for some reason the court didn’t agree with that, we’re prepared to go to trial.”

McGuireWoods is in a sensitive spot. The firm inherited the BAR/BRI case last year when it acquired Van Etten Suzumoto & Becket of Los Angeles.

The proposed settlement puts Eliot G. Disner, who filed the BAR/BRI case, in an even more awkward spot. Mr. Disner, a former Van Etten Suzumoto lawyer, is now a McGuireWoods partner. According to the former BAR/BRI students objecting to the settlement, Mr. Disner told them that he would seek to break up the company. Yet as a partner at McGuireWoods, Ms. Gintz said, he cannot criticize the deal his colleagues have negotiated.

But a settlement would not be a surprising outcome. BAR/BRI has fended off other antitrust attacks. A former California competitor, American Professional Testing Service Inc., contended that BAR/BRI offered courses below cost, bribed law school administrators and tore down posters advertising its course, called Barpassers. The case, which was handled on appeal by a gifted lawyer — John G. Roberts Jr., now chief justice of the United States — was not successful.

Ms. Gintz and her fellow dissenting plaintiffs say that the case against BAR/BRI is strong, and that it is significant that the judge hearing the case denied a summary judgment motion by Kaplan, which sought to end the litigation after the evidence-gathering phase, or discovery.

“What that says is, on the surface of these pleadings, there were triable issues there,” Ms. Gintz said.

Mr. Disner declined to answer questions about the current case or the settlement, deferring to Mr. Allcott, the law firm’s spokesman.

Mr. Rigos, whose company was the victim of the Seattle burglary, sounded sad as he considered the state of the bar review business.

“When I got into this, when I was going to law school in Boston, back then it was really a fun business,” he said, adding, “I don’t know that I’m just getting older and this thing has worn me down, but it doesn’t seem as much fun as it was in those days.”